1. Field of the Invention
The present invention generally relates to a method, and related system, for financing commercial transactions among buyers and suppliers and more particularly to a method and system for financing of trade credit in a manner that reduces the costs of purchasing goods and services under terms of trade credit.
2. Discussion of Related Art
Trade credit is widely used in commercial transactions for the purchase and sale of goods and services, both domestically and internationally. Under conventional terms of trade credit, a supplier supplies goods or services to a buyer, and the buyer agrees to pay for goods and services at some future date, after delivery of the goods or services.
Competition among suppliers typically compels suppliers to sell goods and services under terms of trade credit. However the provision of trade credit comes at a measurable financial cost. This cost is evidenced, for example, by suppliers being willing to offer purchasers a discount for early payment of the purchase price of a sale, or alternatively by suppliers obtaining short term financing from third parties, secured by an expectation to receive future payment in consideration of a trade transaction.
Although trade credit plays an important role in streamlining and enabling economical commercial relationships between suppliers and buyers, it may result in various economic inefficiencies. For example, although a buyer may be able to raise funds under better terms than a supplier, in a commercial relationship, a cash discount may not provide a sufficient incentive for a buyer to surrender credit terms offered by a supplier. As a result, the economic cost of a trade transaction may be higher than it needs to be.
Several methods have been proposed to improve commercial transactions:
U.S. Pat. No. 5,694,552 to Aharoni describes a financing method incorporating a new use of a financial instrument called a trade acceptance draft (TAD) as payment for goods and services. A TAD resembles a post-dated check and requires the cooperation of a supplier, buyer and financial institution. Against a buyer endorsed TAD, a seller may receive from a financial institution an advance of payment with respect to goods and services delivered. The TAD establishes an independent legal relationship between the buyer and the financial institution entitling the financial institution to deposit the TAD at a future due date for collection from the buyer.
U.S. Pat. No. 6,167,385 describes a supply chain financing system and method in which a buyer generates a purchase order, and a supplier ships goods against the purchase order and sends an invoice to the buyer which is stored in a database. A financial institution has direct access to invoices in the database and provides financing to the supplier for goods shipped under selected invoices. Upon maturity of the financing, the buyer settles with the financial institution.
U.S. patent application publication 2002/0082985 describes a method and system for converting existing or future trade credit obligations into a new obligation. Suppliers bargain or bid to provide purchasers a discount for the prompt payment of one or more accounts receivable with respect to a trade transaction. A funding company promptly pays the supplier an agreed discounted payment in satisfaction of an account receivable. At an agreed future date the purchaser pays the finance company an amount greater than the discounted payment, up to the face value of trade transaction.
U.S. patent application publication 2002/0116332 describes a system and method for facilitating a commercial transaction incorporating a new use of a post dated negotiable instrument in the amount of an invoiced value of a trade transaction.
Although these methods may be somewhat effective in securing trade credit or obtaining better credit terms, buyers still may not have a sufficiently adequate incentive to fully collaborate with suppliers to make available to suppliers improved terms of short term credit to which only the purchaser have access.